Consultation paper self regulatory organizations in securities market

Aruhi (Finance Professional) (6236 Points)

02 April 2019  

1.Objective

1.1.The objective of the Consultation Paper is to seek comments from the public onthe  proposal to amend the  Securities and Exchange Board  of  India (Self RegulatoryOrganizations)Regulations,   2004 (SRO   Regulations) for   the purposes  of defining Self  Regulatory  Organization,  simplifying  the  process  of recognition and strengthening the role of Self Regulatory Organizations (SROs) in the securities market.

2.Background

2.1.SEBI had notified the SRO  Regulations on February  19,  2004. As on date, the said Regulations arein forceonlyin relation to distributors  engaged  by  Asset  Management   Companies    of   Mutual   Funds    and    distributors    engaged  by Portfolio Managers.

2.2.SEBI had initiated  the process of selection  of  SRO for distributors of Mutual Fund  (MF) products in 2013. Thein-principle approval granted to one of  the applicants  was  challenged before the Hon’ble Securities  Appellate Tribunal (SAT) and a further appeal was made before the Hon’ble Supreme Court.

2.3. In October 2017, pursuant to an application filed by SEBI, the Hon’ble Supreme Court allowed SEBI to start afresh the selection process for SRO of distributors of MF products

2.4. Pursuant  to the same and after a detailed internal deliberation in the matter, SEBI had filed an application before the Hon’ble Supreme Court to seek leave to make necessary amendments to the SRO   Regulations including that of recognizing a company as an SRO, after considering its experience and capability, without calling for applications.

2.5.The Hon’ble Supreme Court in its order dated November 12, 2018 while allowing SEBI’s application observed the following:

“Prayer to amend the  Self  Regulatory  Organization  (SRO) Regulations and to consider the pending cases in the light of the amended Regulations is allowed.  We  make  it  clear  that  we  have  expressed  no  opinion  on  the  validity  of  the amendment(s) proposed.”

To know more in details, find the enclosed attachment